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Few people in the world understand real estate on a global scale better than Steve Schwarzman. The billionaire CEO of Blackstone (NYSE:BX) has an unerring ability to see where the market is going and be there with plenty of capital to deploy. On the Blackstone second quarter earnings call, Schwarzman made it clear that Blackstone is ready to spend heavily in real estate again, expecting its moves now to reward investors down the line.
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While Blackstone's earnings and revenue didn't meet expectations, it was the news that the company invested $34 billion during the last quarter and has already allocated another $19 billion for this quarter that caught investor attention. Some of that was spent on taking two major real estate companies private. Blackstone acquired Tricon Residential, a rental property company, for $3.5 billion and plans to aggressively invest in developing the company's rental pipeline. In April, it announced that it was taking Apartment Income REIT (NYSE:AIRC) private for $10 billion. Both purchases show that Blackstone still sees ample potential in the residential market. Real estate wasn't the top category for Blackstone's performance; that honor went to its private equity investments in infrastructure, which had a 6.3% return.
Where The Money Is Going Next
Blackstone is famous for moving money from one asset class to another depending on larger global trends. It invested heavily in warehouse spaces and has been moving some of its capital out of warehouses, including selling a portfolio worth over $3 billion to Prologis (NYSE:PLD) last year. Warehouses, as well as residential housing, are still a big part of Blackstone's future. On the earnings call, Blackstone President John Gray told analysts that the current slow pace of construction in both these areas is a positive and should boost demand.
Schwarzman compared artificial intelligence to the invention of the light bulb and the creation of the power grid. He called attention to the fact that upward of $1 trillion may be spent over the next five years to fire up data centers in the United States and another $1 trillion globally. Blackstone says it will be the world’s most significant financial investor in AI infrastructure. It currently has $55 billion in data centers under construction and another $70 billion in the pipeline. Blackstone took data center company QTS private in 2021 and has invested in the company since then.
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To understand how Blackstone has changed its allocation, consider this: in 2007, these three sectors, warehouses, rental housing, and data centers, represented just 2% of the portfolio, and now they represent 75% of the global real estate portfolio. Schwarzman pointed out that this repositioning drove the company’s global performance. The company currently has $60 billion in dry powder, which is available capital to invest in real estate when the moment is right.
The takeaways for investors are simple. We can invest in Blackstone, which has a forward yield of 2.46% and an annual dividend of $3.36. There is also the opportunity to create a public REIT portfolio that mimics much of Blackstone's thesis. You can invest in data center REITs like Equinix (NASDAQ:EQIX) and Digital Realty Trust (NYSE:DLR), which will also be part of capitalizing on the global demand for AI, warehouse and storage REITs like Prologis and rental housing REITs like MAA (NYSE:MAA).
We can also explore private credit and fractional real estate opportunities where we invest alongside general partners making the decisions. We can't be sure if Blackstone's thesis about these real estate sectors is correct, but their track record indicates that Schwarzman and Gray often see trends and ride them to the top.
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This article Billionaire Blackstone CEO Opens The Investing Floodgates, What Investors Should Know Now originally appeared on Benzinga.com